---
title: "Quick ratio (acid-test ratio)"
description: "What the quick ratio or acid-test ratio is, which assets count as quick assets, how to calculate it, how it differs from the current ratio, with a worked example."
canonical: https://ledgeriano.com/glossary/quick-ratio
language: en
publisher: "Ledgeriano"
updated: 2026-11-06
---

# Quick ratio (acid-test ratio)

> What the quick ratio or acid-test ratio is, which assets count as quick assets, how to calculate it, how it differs from the current ratio, with a worked example.

The quick ratio, also called the acid-test ratio, divides quick assets (cash, short-term investments and receivables) by current liabilities. It leaves out inventory and prepayments because they may not turn into cash quickly. A quick ratio of 1 or more means a business can pay its short-term obligations without selling any stock.

The quick ratio is a stricter test than the [current ratio](https://ledgeriano.com/glossary/current-ratio). It matters most for businesses with slow-moving or seasonal inventory, where a healthy current ratio can hide a cash problem.

Receivables count only if they are collectible: deduct the allowance for doubtful debts first. Track the ratio over time with the [financial ratio calculator](https://ledgeriano.com/tools/financial-ratio-calculator) rather than judging a single number.

```
Quick ratio = (Cash + Short-term investments + Receivables) / Current liabilities
Quick ratio = (Current assets - Inventory - Prepayments) / Current liabilities
```

## Example: quick ratio versus current ratio

Using the distributor from the current ratio example, quick assets are cash 40,000 plus receivables 90,000 = 130,000. Divided by current liabilities of 160,000 the quick ratio is 0.81, much lower than the current ratio of 1.56, because most current assets are inventory.

### What is a good quick ratio?

A ratio of 1 or above is usually considered comfortable, but businesses with fast cash sales can operate below it.

### Why is inventory excluded?

Inventory must be sold and then collected before it becomes cash, and in a forced sale it may fetch less than its book value.

Guide: https://ledgeriano.com/guides/management-accounting